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Foundry Daily News

10. August 2007

China denies U.S. manufacturer charges of illegal government steel subsidies

Fresh on the heels of a third round U.S.-China steel negotiations, Chinese and American steelmakers are battling over allegations of illegal Chinese government subsidies of China's booming steel industry.

The China Iron & Steel Association Tuesday attacked the credibility of a recent American Iron and Steel Institute (AISI) report asserting that Chinese mills have received more than $52 billion in government subsidies at the expense of their international competitors.

The AISI has also claimed that the Chinese government ownership and control of the steel industry is far greater than has been reported.

The China Iron and Steel Association told China Daily that privately-owned steelmakers produced 127 million tons and accounted for 36% of total crude steel production in China in 2005, this contrasts with the AISI accusation that the top 20 state-owned mills actually control 91% of production.

Alan Price, one of the AISI study authors, asserted that "China's massive subsidies and pervasive government control of its steel industry are unprecedented and violate WTO [World Trade Organization] rules. Eight of the 10 largest Chinese steel groups are 100 percent controlled by the Chinese government, and more than 90 percent of production of China's top 20 steel groups is state controlled."

"Government subsidies allowed China's steel production to increase by more than 170 percent between 2000 and 2005 and by another 20 percent in 2006. China's steel capacity and production are now four to five times larger than that of the entire Northern American steel industry. Subsidies have also helped China become the largest single steel exporting country by volume in 2006," according to the report, Money for Metal: A Detailed Examination of Chinese Subsidies to its Steel Industry.

Andrew Sharkey, AISI President, claimed that "the result of these massive subsidies is that China's government-controlled steel production is distorting the world marketplace, and the problem is only getting worse. China's overcapacity and its steel exports to the United States are skyrocketing."

Earlier this year, the U.S. Commerce Department estimated that China's steel production has more than doubled over the last four years to 418 million tonnes in 2006, making China the world's largest steel producer and exporter.

However, the China Iron & Steel Association said it will take action to protect Chinese steelmakers if the U.S. takes action against them through the WTO. The AISI report called for the Chinese government to "end its policy of control, direction and subsidization of its steel industry. If it does not, the United States and other trading partners should increase efforts to require China's compliance with its WTO commitments and international trade law."

Last week, Interfax-China reported that the China's General Administration of Customs released statistic revealed that China's steel product exports to the United States during the first six month of this year increased only 1% year-on-year to 2.343 million tons.

U.S. and Chinese officials last week also held a third session on the U.S.-China steel trade. The delegation included the Chinese Ministry of Commerce, the Chinese Iron & Steel Association, as well as steel manufacturers Baosteel, Angang and WISCO.

Meanwhile, the Associated Press reported Monday that China's shares rose to a new record high for a second straight trading session, driven by gains in steel and other metals companies. Wuhan Iron & Steel rose 8.1%, Baoshan Iron & Steel gained 6.5 percent, and Inner Mongolian Baotou Steel Union was up 5.9 percent.

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